With most of the details behind Donald Trump’s plans for the Affordable Care Act and other issues affecting employee benefits still to come, advisers have more questions than answers to act on at this early stage in his presidency. What is going to happen with the ACA and its current standards? What about rules, regulations and taxes such as the fiduciary rule, overtime rule and the Cadillac tax? How should advisers guide their clients during this time of change and uncertainty? Legal experts share likely scenarios under President Trump.
The future of the ACA
While Republicans have the votes in the House for repealing of the ACA, an absolute repeal of President Obama’s signature health reform legislation is highly unlikely, says Chris Beinecke, counsel in the employee benefits and executive compensation group at Haynes and Boone, LLP, in Dallas.
What he does see happening is a reconciliation of the Affordable Care Act. A procedural bill on this motion has already passed. “When they do their budget reconciliation they can pick apart provisions of the ACA that directly involve tax spending, or things that affect the budget,” Beinecke says. “So the employer shared responsibility provision, the individual mandate, the Cadillac tax, certain other taxes, fees and assessments in the Affordable Care Act could all be put under immediate threat.”
A budget reconciliation bill only requires 51 votes to pass in the Senate and is not subject to a filibuster. While not an absolute repeal of all ACA provisions, reconciliation could “defund” the ACA and eventually lead to a general repeal and replacement.
Ed Fensholt, senior vice president and director of compliance services at Lockton Companies, says the brokerage is engaging its health reform advisory firm to help clients work through the possible changes happening in the health insurance industry.
“We are putting together our lawyers, our actuaries, our human resource tech professionals, data analysts and all of those folks that touch our clients in different ways in regards to their benefit programs,” Fensholt says. “The Affordable Care Act implicated everything that we do along those lines and we fully expect that whatever the Republicans do will also impact all of those things.”
For regulations that cannot be changed through a reconciliation process, Trump could authorize federal agencies to not enforce the ACA. It is likely this will be limited to certain provisions, however. For example, the employer shared responsibility requirements may be suspended, but the dependent coverage mandate would likely remain active. “A lot of the things that [Republicans] want to halt enforcement on are reconciliation-related, but they could list certain mandates from the plan design parameters,” Beinecke says.
There are legal concerns with non-enforcement, he adds, but with a Republican Congress it is unlikely there will be action taken against this approach. Lawsuits must generally be brought against the respective government agencies; however the president does retain immunity.
Fensholt says his clients would love to see a moratorium on enforcement of the ACA reporting rule because of strict tax rules that require them to file reports with their employees by March 2 and file the same returns by March 31.
“They would love to see between March 2 and 31 some guidance as to whether or not they need to make these reports,” Fensholt says. “As politically popular and politically expedient as that might be for the Trump administration, there are some legitimate reasons why they might not do that.”
Fensholt adds that one of the chief reasons why the Trump administration may still enforce ACA reporting is the fact that the IRS uses these reports from employers and the insurance companies to figure out who gets offers of health coverage in 2016.
“If you were offered coverage by an employer or if you were enrolled in an employer-based plan, you are disqualified from going into Healthcare.gov and buying an individual insurance policy and claiming some federal subsidies from differing that cost,” Fensholt says. “So the IRS needs to know who got those offers in 2016 because they want to know if someone got federal taxpayer money that they were not entitled to.”
Fiduciary, overtime and persuader rule
While many are fixated on the ACA’s uncertain future, some are taking a look at the state of new rules that have either taken effect recently or were intended to take effect in 2017, such as the fiduciary rule, overtime rule and persuader rule.
Because of the level of unpopularity over regulations such as the overtime rule and Cadillac tax, advisers and attorneys are both saying these could be finished.
Erin Sweeney, attorney at Miller & Chevalier, says she does not expect the Trump administration to defend the persuader rule — which addressed the legality of discussions around unionizing in the workplace — and the overtime rule, since both have been placed under injunction by two Texas courts.
“You can envision a situation where the Trump administration would settle with the plaintiff potentially in those lawsuits, or refuse to defend the regulation,” Sweeney says. “My view on both the persuader rule and the overtime rule is that they are both dead in the water.”
Sweeney says the fiduciary rule is a different story because advisers, brokers and record keepers have gone too far and invested too much time setting their clients up for compliance.
Sam Henson, vice president and director of legislative and regulatory affairs at Lockton Retirement Services, says once Secretary of Labor appointee Andrew Puzder has assigned leadership roles within the DOL we will start to know more about how fiduciary regulation will proceed.
“We’re working with speculation here because, unlike the overtime rule, Andy Puzder, to my knowledge, has not made any comment on what they would do with the fiduciary rule,” Henson says. “If we know Puzder’s public comments about how he’s not a big fan of government regulation dictating the market, I have a pretty strong assumption that they’ll do the same approach with the fiduciary rule.”
Henson adds that many in the broker and adviser industry have been working on the fiduciary rule for almost five years and the level of time and money invested into compliance with this rule has caused lasting effects that will still remain whether the rule is removed or not.
“It’s almost like a ripple in a pool of water, it’s already done, the bell has been rung,” Henson says. “Our industry has done so much to already change the way we do business in terms of our compensation arrangements to prepare to give advice to fiduciaries, so I think a major part of the industry has gone too far down that road.”
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